ALABAMA LIFE & HEALTH
INSURANCE EXAM QUESTIONS WITH
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
Which of the following would be considered a speculative risk? - ANS The possibility the
painting you bought might be a long-lost masterpiece
A speculative risk is one in which there is a chance for either loss or gain. Example: Gambling,
Casino's, Lottery, etc. All of the other choices describe pure risk, where there is no chance of
gain, only a chance of loss exists.
Which is the proper term for a company owned by its policy owners? - ANS A mutual
insurance company
A producer who is acting as an agent is representing: - ANS Always the insurer
All of the following are elements of a contract, except: - ANS Authority
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
,All enforceable contracts must include these characteristics: offer and acceptance (agreement),
considerations, competent parties, and legal purpose. Authority is not considered one of the
elements of a legal contract.
Each of the following would be an element in the definition of fraud, except: - ANS An
individual warrants a fact stated on the application
A warranted fact is one guaranteed to be true. Although no statement on an application is
regarded as warranty, no fraud is involved if a statement is guaranteed to be true.
Examples of Fraud - ANS Intentional material misrepresentation with the intent of causing
injury to another party
Withholding of known material facts
A false statement on the application that is material to the acceptance of the risk
A company that is licensed to sell insurance in a particular state is: - ANS An authorized
Company
In order to be valid, a contract must be between individuals considered legally able to enter
into an agreement. This principle is known as: - ANS Competent parties
An insurance contract is an aleatory contract. This means: - ANS Equal value is not given by
both parties to the contract
Aleatory: contract of unequal values exchanged
The ____________ market is a private source of coverage of last resort for individuals or
businesses that have been rejected by voluntary market insurers. - ANS Residual
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, To address adverse selection what can an insurer legally do? - ANS Establish and enforce
sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and accepting risks that are
more likely than average to suffer losses.
A contract that is drafted by an insurer and receives no input or alteration from the insured, is
considered a(n): - ANS Contract of Adhesion
_________ refers to the jurisdiction where an insurer was formed or incorporated. -
ANS Domicile: Domicile refers to the jurisdiction either state or country where an insurer
was formed or incorporated.
_____________ insurance allows for insurance coverage to be obtained when not available
from admitted carriers. - ANS Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-admitted
insurers.
To make insurance more affordable and protect the insurance company from paying out too
much in claims, insurers will: - ANS Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are insurance
companies that accept all or a portion of the financial risk of loss from the insurance company.
The field underwriter is the _________ and is not a determiner of insurability. -
ANS Producer
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
INSURANCE EXAM QUESTIONS WITH
100% CORRECT ANSWERS | LATEST
VERSION 2025/2026.
Which of the following would be considered a speculative risk? - ANS The possibility the
painting you bought might be a long-lost masterpiece
A speculative risk is one in which there is a chance for either loss or gain. Example: Gambling,
Casino's, Lottery, etc. All of the other choices describe pure risk, where there is no chance of
gain, only a chance of loss exists.
Which is the proper term for a company owned by its policy owners? - ANS A mutual
insurance company
A producer who is acting as an agent is representing: - ANS Always the insurer
All of the following are elements of a contract, except: - ANS Authority
1 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
,All enforceable contracts must include these characteristics: offer and acceptance (agreement),
considerations, competent parties, and legal purpose. Authority is not considered one of the
elements of a legal contract.
Each of the following would be an element in the definition of fraud, except: - ANS An
individual warrants a fact stated on the application
A warranted fact is one guaranteed to be true. Although no statement on an application is
regarded as warranty, no fraud is involved if a statement is guaranteed to be true.
Examples of Fraud - ANS Intentional material misrepresentation with the intent of causing
injury to another party
Withholding of known material facts
A false statement on the application that is material to the acceptance of the risk
A company that is licensed to sell insurance in a particular state is: - ANS An authorized
Company
In order to be valid, a contract must be between individuals considered legally able to enter
into an agreement. This principle is known as: - ANS Competent parties
An insurance contract is an aleatory contract. This means: - ANS Equal value is not given by
both parties to the contract
Aleatory: contract of unequal values exchanged
The ____________ market is a private source of coverage of last resort for individuals or
businesses that have been rejected by voluntary market insurers. - ANS Residual
2 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
, To address adverse selection what can an insurer legally do? - ANS Establish and enforce
sound underwriting practices
Underwriting helps to protect the insurer against adverse selection and accepting risks that are
more likely than average to suffer losses.
A contract that is drafted by an insurer and receives no input or alteration from the insured, is
considered a(n): - ANS Contract of Adhesion
_________ refers to the jurisdiction where an insurer was formed or incorporated. -
ANS Domicile: Domicile refers to the jurisdiction either state or country where an insurer
was formed or incorporated.
_____________ insurance allows for insurance coverage to be obtained when not available
from admitted carriers. - ANS Surplus Lines
Insurance can be obtained through surplus lines brokers (producers) from non-admitted
insurers.
To make insurance more affordable and protect the insurance company from paying out too
much in claims, insurers will: - ANS Reinsure the risk
Reinsurance is what makes insurance affordable. Reinsurance companies are insurance
companies that accept all or a portion of the financial risk of loss from the insurance company.
The field underwriter is the _________ and is not a determiner of insurability. -
ANS Producer
3 @COPYRIGHT 2025/2026 ALLRIGHTS RESERVED
